Advertisement
Advertisement

Gold Underpinned by Escalating Events in Middle East

By:
James Hyerczyk

February Comex Gold futures rallied nearly one-percent on Tuesday as news that Turkish fighter jets had shot down a Russian-made warplane near the Syrian

Gold Underpinned by Escalating Events in Middle East

GOLD BARS
February Comex Gold futures rallied nearly one-percent on Tuesday as news that Turkish fighter jets had shot down a Russian-made warplane near the Syrian border encouraged investors to seek safety. The news also fueled a break in U.S. equity markets. The move in gold was primarily driven by short-covering and hedging.

Although gold is rebounding from nearly a six-year low, the precious metal remained under pressure from expectations of a Fed rate hike in December.

January Crude Oil rose as much as three percent on Tuesday on increased tensions in the Middle East. Although the news that a Russian-made warplane had been downed sent oil prices higher, there were no immediate threats to supply so gains are likely to be limited.

The EUR/USD firmed on Tuesday and the GBP/USD was under pressure. The Euro firmed after the dollar weakened on the news of the downing of a Russian-made aircraft by Turkish-fighters.  

The GBP/USD fell after the Bank of England’s chief economist Andy Haldane said he saw more downside risks to growth and inflation than reflected in the Bank’s latest economic outlook, and he reiterated his view that the Bank’s next move might be a rate cut.

“I see the balance of risks around U.K. GDP growth and inflation skewed materially to the downside, more so than embodied in the November 2015 Inflation Repot,” Haldane said in an annual statement to parliament’s Treasury Committee.

Bank of England Governor Mark Carney also helped weaken the Sterling when he said he did not know when British interest rates should start to rise. “The question in my mind is when is the appropriate time for interest rates to increase, and that is strongly consistent with the strength of the domestic economy,” Carney told members of Britain’s parliament on Tuesday.

Carney also said that the Bank would raise rates when the time was right. Before that, he had said a decision on whether to raise rates would come into sharper focus around the end of this year. But that was before the deepening of the slowdown in the global economy which has kept most BoE rate-setters on the fence.

In other news, the Commerce Department on Tuesday said the nation’s gross domestic product grew at a 2.1 percent annual pace, not the 1.5 percent rate it reported last month. The news that the U.S. economy grew at a faster pace than previously reported could give the Fed the confidence to raise interest rates next month. 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement